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This paper estimates the costs of sovereign defaults to a broader extent than has been done in the literature. Applying the synthetic control method to a sample of 131 defaults since 1900, it finds that, on average, growth in the first two years falls 3.6 and 2.4 percentage points short of the counterfactual. Still, after a decade, defaulters’ economic output per capita is nearly 17 percent below that of the counterfactual. Poverty headcounts—available since the 1980s—exceed their pre-crisis levels by roughly 30 percent shortly after default and remain elevated a decade later.


Farah-Yacoub, Juan P., Clemens Graf von Luckner, Rita Ramalho, and Carmen Reinhart. "The Social Costs of Sovereign Default." World Bank Group, Policy Research Working Paper Series, August 2022.